What do clearing and custody each cover?
Clearing happens after a trade is executed. FINRA's glossary describes a clearing firm as an organization that completes securities transactions by taking care of validation, delivery and settlement. Custody is what comes next and continues over time: holding the securities and cash, and keeping the record of who owns what.
The two terms are often used together because the same firm frequently does both. Fidelity, for example, describes National Financial Services as its clearing firm, where investments are held in custody, and BNY Pershing lists clearing, brokerage custody and bank trust custody as separate offerings.
How does correspondent clearing work?
Many broker-dealers don't settle trades or hold customer assets themselves. FINRA's glossary defines an introducing firm as a brokerage firm that can perform the functions of an investment professional except accept money, securities or property from a customer. That firm, often called the correspondent, signs a carrying agreement with a clearing firm that does those things.
FINRA Rule 4311 governs these agreements and recognizes two forms. In a fully disclosed arrangement, the carrying firm keeps the individual customer accounts on its books. In an omnibus arrangement, the correspondent is generally treated as the customer; Apex Clearing's agreement with Webull, filed with the SEC, describes clearing on an omnibus basis.
A few firms do it all in-house. These are self-clearing broker-dealers, which carry their own customer accounts and don't need a correspondent relationship.
Who is responsible for what in a clearing agreement?
Rule 4311 requires the agreement to spell out each party's duties. The rule lists nine functions: opening and approving accounts, accepting orders, transmitting orders for execution, executing orders, extending credit, receiving and delivering funds and securities, preparing and sending confirmations, maintaining books and records, and monitoring accounts.
Two duties must be expressly assigned to the carrying firm: safeguarding funds and securities under SEC Rule 15c3-3, and preparing and sending customer account statements. An introducing firm can prepare or send statements on the carrying firm's behalf only with FINRA's prior written approval. The carrying firm must also get FINRA's prior approval for the agreement itself and for material changes to it.
This is why a client of an introducing firm may see a second firm's name on statements. Rule 4311 requires that the customer be told about the arrangement in writing when the account opens, and promptly told of a change in the parties or a material change in who does what.
Where do RIAs fit in?
A registered investment adviser is not a clearing firm. Under SEC Rule 206(4)-2, an adviser with custody of client assets must generally keep them with a qualified custodian, such as a bank or broker-dealer, which sends statements directly to clients. That custodian may be a dedicated RIA platform or a broker-dealer that also clears for other firms.
Large groups often run the two businesses side by side, and Form ADV filings reflect it. In Financial ADVSR's tally of wealth-focused RIAs, 1,326 name Fidelity Brokerage Services and 692 name National Financial Services, while 160 name Pershing Advisor Solutions and 336 name Pershing LLC. Some RIAs also use a custodian that relies on another firm to clear; TradePMR, for example, clears through Wells Fargo Clearing Services.
Hybrid firms touch both models. Their advisory assets sit with custodians, while any business through an affiliated or outside broker-dealer follows that broker-dealer's clearing arrangement.
Which clearing firms do RIA-affiliated broker-dealers use?
Financial ADVSR reviewed the latest annual audited reports on EDGAR for 984 broker-dealers affiliated with SEC-registered RIAs, as of Oct. 15, 2026. Of those, 373 report clearing through another firm, and 181 of the 373 name at least one clearing firm. Pershing is named by 76 of the 181, about 42%. National Financial Services is named by 34, about 19%. RBC Capital Markets is named by 22, about 12%, and Apex Clearing by 14, about 8%.
Further down are Axos Clearing with 9, Wedbush with 8, Hilltop Securities and StoneX with 7 each, Interactive Brokers with 6 and Wells Fargo Clearing Services with 5. Twenty-five of the 181, about 14%, name more than one clearing firm.
These counts show who RIA-affiliated broker-dealers name, not market share by assets, and they exclude firms whose reports don't name a clearing firm. BNY says separately that LaRoche Research ranked Pershing the top U.S. clearing firm by number of broker-dealer clients in 2025, and reports $3.6 trillion in global client assets as of June 30, 2026, for Pershing LLC and its global affiliates.
How are customer assets protected?
SEC Rule 15c3-3, the customer protection rule, applies to broker-dealers that carry customer accounts. It requires them to promptly obtain and keep possession or control of customers' fully paid and excess margin securities, and to hold cash or qualified securities in a reserve bank account sized by a set formula. The calculation is usually weekly, and daily for firms with average total credits of $500 million or more.
If a brokerage firm fails, SIPC protection covers missing customer cash and securities up to $500,000 per customer, including up to $250,000 in cash. SIPC does not protect against a decline in market value.
What did T+1 change?
The SEC shortened the standard settlement cycle for most broker-dealer transactions from two business days after the trade to one, with compliance required on May 28, 2024. Rule 15c6-1 sets the standard cycle, and the parties to a trade can still expressly agree to a different settlement date when they make the trade.
For clearing firms and their correspondents, that leaves less time between a trade and final settlement to resolve exceptions.
What happens when a broker-dealer changes clearing firms?
A change in clearing firm generally means customers' accounts move to a new carrying firm. Rule 4311 requires prompt written notice of a change in the parties to the agreement, with an exception for transfers made consistent with FINRA rules and federal securities law. That exception covers ACATS transfers using an authorized Transfer Instruction Form, and transfers outside ACATS when customers are notified another way, such as through affirmative or negative response letters.
The same mechanics come up when an advisor moves firms, which is covered in our guides to ACAT transfers and repapering and to switching broker-dealers.